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An Apple iPhone with a bit of a bite.
Does Apple benefit from making an unknown device identifier less common? At least one ad network thinks so. Why, InMobi He says, when Apple disapproves of Identifier for Advertisers (IDFA), it makes advertising less valuable.
And that means that applications must look for other ways to earn money. Ways that become income for Apple.
“When you move away from IDFA … then the only viable option for the publisher becomes the purchase of applications or subscriptions”, Sergio Serra, who leads product management at InMobi, said on a recent TechFirst podcast. “Apple receives a 30% fee for all in-app purchases, and subscription becomes … 15% after the first year.”
Serra is talking about mobile app monetization.
While there are several ways that app publishers can make money from their apps, investing in mobile advertising reached $ 224 billion this year, and 81% of games – By far the most popular types of applications – They generate revenue through advertising. According to calculations from another ad network, advertising provides 63% of revenue from gaming applications and 66% of revenue from non-gaming applications.
It goes without saying that when an app generates ad revenue, Apple gets none of it. Meanwhile, if app developers sell subscriptions or in-app purchases, Apple gets 15-30% of the total sale.
The back story here is that Apple is changing the IDFA from a default setting to a subscription-only option in iOS 14. Similar to the messages you see on websites about cookies in GDPR messages, iPhone owners will start seeing messages about every app they install, asking for permission to track (if requested by the app). Most marketers think this will result in significantly lower measurability of marketing and consumer tracking. And that will be affect the ability of ad networks to target users with relevant advertising. It will also affect the ability of app developers to charge premium prices for ads, at least in some cases.
It will also significantly increase user privacy, which is Apple’s stated goal.
Apple has differentiated itself from Google, Facebook, and other global tech companies with a focus on privacy. The company has made significant effort to block SMS with end-to-end encryption for iMessage. It has anti-tracking software built into Safari, your web browser. It has locked iCloud so that only you can access your stored information, it does not direct your email in Mail, your email client, for advertising, it does not share your location with ad networks, it does not use health data for targeted advertising, and Apple does not share data about what you buy on your phone with any other company.
Privacy is such an important focus at Apple that the company just launched a important announcement focusing on “oversharing” by tech companies, ending with the phrase “Privacy. That’s iPhone.”
Screenshot of an Apple video ad focusing on privacy on mobile devices.
“Some things should not be shared,” says Apple. “That’s why iPhone is designed to help you control your information and protect your privacy.”
The reality is that Apple’s identifier for advertisers, IDFA, was created by Apple to improve privacy. It is a user-controlled, interchangeable identifier that replaced a hard-coded, never-changing device identifier, the UDID, over which users had no control. The reality is also that IDFAs, limited as they are, could also be used for nefarious purposes.
As I have written before, a Chinese citizen was arrested by the FBI on a plane about to take off for China with a USB stick full of IDFA in his possession, back in 2015.
Unscrupulous organizations using IDFA can track people, can identify them, and can use identifiers as a critical component of electronic surveillance. All you would have to do to get started would be to start a small ad tech company, join some ad exchanges, and start bidding on targeted traffic. This is easily within the range of capabilities for a small technology company, which could lead to Cambridge Analytica-style privacy breaches, or a nation-state, which could lead to loss of competitiveness, blackmail opportunities or insecure knowledge of high ranking military or politicians. personal.
In fact, I’d be surprised if it didn’t happen.
The NY Times detailed how the president of the United States could be tracked quite easily this way, given that someone in his entourage uses his phone like any normal citizen. HackRead showed how the US Secret Service uses smartphone location data to track and locate people without their permission.
So there is a real problem here and Apple is trying to solve it.
But there is also the question of monetary benefit.
Apple’s App Store raised $ 61 billion in digital goods and services like in-app purchases, e-books, music, and apps in 2019. We know because Apple told us. While this is a fraction of all iPhone-enabled commerce, think Amazon and Walmart sell through their apps, it’s enough to put Apple at No. 10 on the list of “Top 100 Retailers of 2019”. the National Retail Federation. (And, of course, it doesn’t count any of Apple’s revenue from the sale of iPhones, iPads, Macs, accessories, and anything else Apple sells at physical locations, the mobile app, and the Apple Store website.)
While Apple doesn’t take a 30% cut of all that $ 61 billion, which would be a staggering $ 18.3 billion, it does require a 15-30% cut on a significant chunk.
It’s revenue that Apple doesn’t get if apps turn to mobile advertising for revenue instead of in-app purchases, app subscriptions, or paid-to-install apps.
“The main way that publishers use to monetize their properties is advertising, as we all know,” says Serra. “Since they have a 15-year lag in the ad ecosystem, the only way … instead of trying to bring everything to ad [is] to change … publishers’ revenue models and business models to subscriptions and in-app purchases. “
Serra acknowledges that this is speculation and that he has no inside knowledge of Apple’s plans or motivations.
Apple has its own ad network, of course, but it’s small and currently limited mostly to ads placed on the App Store, where people find and select apps to install. It is not a significant revenue generator for the company, and although it has access to more data on the device than other ad networks (Apple news, stocks, App Store searches, and some device data), it does mix its data with that of another 5000 people. data to be a target collectively and not personally, allowing what Apple calls “differential privacy.”
Ultimately, the question is: is there a better way for Apple to ensure privacy and at the same time allow advertising effectiveness? Apple has offered a partial solution, SKAdnetwork, but InMobi says it is a very limited solution.
“It’s a 0.1 version of the current industry situation from an advertising perspective,” says InMobi Co-Founder and CEO Abhay Singhal. “It’s primitive.”
What’s missing, Singhal says, is the ability to run the desired number of campaigns, as well as to get significant amounts of post-install data in app install ad campaigns. Also, there is no simple ability to perform creative optimization to identify which ads perform best. Perhaps most annoying for both advertisers and consumers: There is no way to limit the frequency of how many times a specific ad shows to a specific person, because there is no granular data available.
Worse still, says Serra, Apple is doing something unique in privacy, when global solutions are needed.
“The moment you start taking a private, individual privacy approach, you destroy the consistency that the ecosystem was trying to create for the user,” Serra told me. “So now in Europe, for example, a user can come to a situation where they are using the application for the first time. The TCF 2.0 framework asks you with a message: ‘Hey, can we track you down?’ … and again, you have to deal with the message from Apple. So I think it gets very confusing. Privacy should not be specific to the screen or the operating system platform. It should be very consistent. And with this move, I think we are taking a step back. “
Apple’s position on this is unlikely to change based on what an ad network creates, of course. For something InMobi is talking about, like post-install data, there are likely differential privacy solutions, if an advertiser is working on a large scale. For other pieces, like frequency capping, it’s hard to understand how it can be implemented without granular data being shared at the user level.
Apple’s SKAdNetwork currently provides a privacy-safe piece of post-installation conversion data such as registered user or beat a level or ordered a meal. Apple is unlikely to go any further than that.
However, the question about consistency is compelling.
Today, consumers are protected by conflicting privacy standards depending on where they live and travel. Even though you may live in Canada, for example, you still receive many GDPR privacy notices from the European Union. In California, people may be covered by the California Consumer Privacy Act, but Apple’s rules add some unique twists.
The good news is that as of this week, Apple has delayed the full implementation and enforcement of its planned privacy changes for iOS 14. That gives the industry more time to prepare, gives stakeholders more time to give feedback to Apple and gives Apple more time to consider whether to make any changes to SKAdNetwork.
And hopefully to dispel any hint of doubt as to whether your privacy movements are motivated by other concerns.
Get the full transcript of our conversation here.
